The private sector faces challenges to growing and developing within Turkmenistan’s primarily state-controlled economy. For small and medium-sized entrepreneurs in the regions, the challenges vary but include overregulation and excessive bureaucratic procedures. A survey of SMEs in the country’s five regions found similar obstacles for business growth as well as some differences.
In the northern province of Dashoguz, SME representatives identified the following as the most pressing barriers to growing their businesses:
- Limited access to credit
- Lack of information on business-related legislation
- Not enough information available about the domestic market situation
In Ahal region, where the capital Ashgabat is located, entrepreneurs report that the situation for business has stabilized in the past year. SME owners expressed optimism about the state of their business activities, asserting that if one is persistent and driven, it is possible to operate a successful business. SMEs in the Balkan region, which borders the Caspian Sea, also note some improvements in the ease of doing business, citing market stabilization as the main factor.
Overwhelmingly across the five regions, however, SMEs struggle the most with financing their business activities. Most SMEs rely on family or relatives for credit as bank loans can be difficult for smaller businesses to obtain due to the necessity of having to provide sufficient collateral. In addition, SMEs have yet to move beyond the domestic market and tap into European or Asian markets. Mary and Lebap regions on the border with Afghanistan are the exception with more SMEs doing business and partnering with foreign companies.
SMEs across the five regions identified the following factors as detrimental to their growth:
- Few opportunities to obtain business and legal consultations
- Delayed payment from the state after completing contractual work
- Time-consuming, costly, and bureaucratic procedures required to operate a business
Turkmenistan has consistently ranked poorly in the Heritage Foundation’s Index of Economic Freedom with endemic and systemic corruption and pervasive cronyism. The survey reflected these issues as SMEs across the five regions reported problems with lack of transparency in taxation and an unequal playing field between the state and private sectors. Although the government has taken some steps to promote private sector growth, larger business interests still dominate. The SME community can provide a counterweight to excessive government control of the economy as well as a crucial impetus for economic growth, if business-related legislation and polices take into account the best interests of smaller private business, especially in the regions.
Bobbie Jo Traut is Program Officer for Eurasia at CIPE.